Summary of JFrog Conference Call Company Overview - JFrog is positioned as a leader in the software supply chain management, focusing on binary management and DevSecOps, with a unique platform that integrates these functionalities [2][3][5] - The company aims to enhance developer efficiency by managing the transition from source code to machine language, addressing the rapid pace of software updates [5][7] Key Highlights from Q1 Performance - Q1 results reflect a culmination of efforts over multiple quarters, particularly in enterprise sales and security integration [10][11] - Significant growth in large deals, with one customer achieving an annual contract value (ACV) of over $30 million, indicating a shift from smaller deals to larger enterprise contracts [12][16] - Security revenue has grown from essentially zero to 3% of total revenue, showcasing successful penetration into security budgets [13] - Unexpectedly high cloud usage across diverse customer segments, indicating robust demand despite Q1 typically being a slow quarter [14][15] AI and Large Language Models (LLMs) - JFrog is exploring the integration of AI and LLMs into its offerings, believing that increased binary usage will benefit the company [19][21] - The acquisition of QuocAI aims to position JFrog as a key player in managing LLMs, with plans for both cloud and self-hosted versions of the product [20][48] - Current usage trends suggest experimentation with AI tools among customers, but mass adoption is still pending due to industry uncertainties [49][50] Competitive Landscape - JFrog is the only publicly traded company in the DevOps binary management space, with limited competition from private firms like Sonatype and small startups [34][36] - The company differentiates itself through its comprehensive technology stack and security capabilities, which are critical for managing binaries [36][38] M&A Strategy - JFrog maintains a focus on free cash flow to remain agile for potential acquisitions, particularly in the AI and ML sectors [51][52] - The company is not currently seeking transformational acquisitions but is open to tuck-in acquisitions based on customer feedback and market needs [52] Security as a Growth Vector - JFrog sees significant growth potential in security, with plans to deepen penetration into existing customer bases [54][55] - The integration of security sales into a unified approach involving developers and security teams is a strategic focus [56] Financial Outlook and Guidance - The company has adopted a cautious approach to guidance, excluding large deal migrations and usage upside due to market uncertainties [27][30] - JFrog aims to balance growth with profitability, maintaining a free cash flow margin target of 26% to 29% [59][62] Conclusion - JFrog is strategically positioned to capitalize on the growing demand for software supply chain management and security solutions, with a focus on innovation and profitability while navigating a competitive landscape and evolving market dynamics [60][62]

Summary of JFrog Conference Call Company Overview - JFrog has over 7,300 customers as of the end of 2024 [3] - The company has penetrated more than 82% of the Fortune 100 across all industries [4] - JFrog employs over 1,600 people and has a Total Addressable Market (TAM) exceeding $40 billion [4] - The company reported $450 million in revenue over the last twelve months, reflecting a 22% year-over-year growth [4] - JFrog generated $119 million in free cash flow and has a net dollar retention rate of 116% [4] Business Model and Financial Metrics - JFrog operates on a subscription-based model, with consistent revenue growth [12][13] - The company has a high gross retention rate of 97%, indicating strong customer loyalty [14] - The revenue growth for Q1 was also 22%, with guidance indicating a 17% growth for the upcoming year [13] Product Offerings - JFrog aims to streamline the DevOps process, integrating DevOps, DevSecOps, and MLOps into a single platform [5][9] - The company manages binaries, which are critical in the software supply chain, and offers advanced security products to protect these binaries [6][7] - JFrogML, a recently launched product, manages large language models and integrates with repositories like Hugging Face [9][10] Market Position and Competitive Landscape - JFrog has a strong position in the market, with significant penetration in various industries and a long runway for growth [12][17] - The company faces competition primarily from Sonatype and Cloudsmith in the Artifactory space, with Sonatype experiencing scalability issues [49][50] - JFrog differentiates itself by focusing on binary management and security, which is increasingly becoming an attack vector in software development [54] Strategic Partnerships - JFrog has established a partnership with GitHub to enhance integration between source code and binaries, improving user experience and security [40][41] - The collaboration aims to consolidate security tools and streamline the management of vulnerabilities [46] Future Outlook - JFrog is confident in its go-to-market strategy, having invested in building a strong enterprise sales team and seeing growth in million-dollar customers [62] - The company anticipates that the migration from self-hosted to cloud solutions will drive additional revenue growth [66] - JFrog expects its net dollar retention rate to remain stable at 116%, with potential for growth as customers increase usage beyond minimum commitments [68] Additional Insights - The shift towards AI and machine-generated code is expected to increase the volume of binaries, benefiting JFrog's business model [71][72] - JFrog's pricing model varies based on deployment type, focusing on data transfer, storage, and the number of contributing developers for advanced security [78]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $122.4 million, representing a 22% year-over-year increase [8][18]. - Operating margin improved to 17.4%, up from 14% in Q1 2024 [22]. - Cloud revenue reached $52.6 million, a 42% increase year-over-year, accounting for 43% of total revenue compared to 37% in the prior year [18][19]. - Gross profit was $101 million, with a gross margin of 82.5%, down from 85.1% year-over-year [21]. - Free cash flow for Q1 was $28.1 million, reflecting a 23% margin compared to 17% in the previous year [23]. Business Line Data and Key Metrics Changes - Self-managed or on-premises revenues were $69.8 million, up 10% year-over-year [19]. - Revenue contribution from Enterprise Plus subscriptions grew to 50% of total revenues, up from 49% in the prior year, with a 37% year-over-year growth in this segment [19][20]. Market Data and Key Metrics Changes - The number of customers spending over $1 million annually increased to 54, a 35% growth year-over-year [9]. - Customers spending more than $100,000 annually grew to 1,051, a 15% increase year-over-year [9]. Company Strategy and Development Direction - The company is focusing on capturing momentum in cloud, DevOps, security, and MLOps markets [10][11]. - JFrog aims to unify DevOps, DevSecOps, and MLOps in a single solution, enhancing its position in the market [11][27]. - The partnership with Hugging Face aims to secure open-source machine learning models, indicating a strategic focus on AI and security [12][27]. Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding macroeconomic uncertainties affecting sales cycles and customer commitments [10][24]. - The outlook for Q2 and the full year 2025 reflects a conservative approach due to market volatility, with expected revenue growth of 19% year-over-year for Q2 [24][25]. - The company anticipates a full-year cloud growth rate of 31% to 33% [25]. Other Important Information - The company reported a net dollar retention rate of 116% and a gross retention rate of 97% [21]. - JFrog's cash and short-term investments totaled $563.5 million at the end of Q1 2025, up from $522 million at the end of 2024 [23]. Q&A Session Summary Question: Clarification on cloud consumption above commitment - Management confirmed that the increased consumption was broad-based across various customers and industries, not limited to a narrow set [33]. Question: Details on a significant deal with an AI technology leader - The deal involves using JFrog as the system of record for all models, with potential future expansions into security and ML models [35][36]. Question: Guidance construction and macro impact - The company remains cautious due to market uncertainty and has derisked its guidance by excluding large deals [40][41]. Question: Customer behavior regarding cloud commitments - Customers exceeding their commitments may continue to use services but are in a rigid purchasing environment, making future commitments uncertain [52]. Question: RPO growth and deal concentration - RPO growth was broad-based, not concentrated in a few large deals, indicating strong demand across multiple customers [56]. Question: Security sales cycles and renewals - Sales cycles for security remain consistent, with renewals aligned with projections and some upselling occurring [102].